Question

With the help of a diagram, explain the condition when E_P < 1.

Answer 1

Ep < 1: Inelastic Demand

If the price of the commodity falls, total expenditure decreases, and with a rise in its price, total expenditure increases, then demand for that commodity will be inelastic or less than one. In other words, when there is a direct relationship between the price and total expenditure, the price elasticity of demand will be less than one.

Diagram: The demand curve is relatively steeper, indicating that a large change in price leads to a smaller change in quantity demanded.